Project finance

A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z

What is project finance?

Project finance is a structured finance solution. It is used to pay for the construction and operation of projects such as wind farms, hydroelectric dams or highways. It is long-term financing. Debt-repayment is mainly based on cash flows generated from the completed project. Project financing includes infrastructure financing as well as PPPs (Public Private Partnerships).

A project finance usecase

Let's take the case of a company that wants to build and operate a highway. Instead of taking on debt directly, this company will create a legal entity called a Special Purpose Vehicle (SPV), into which it will inject cash in the form of capital. This makes the company the sole owner/shareholder of the SPV – but it is actually the SPV that will be borrowing from banks in order to finance the project. Once the project is built, it is the financial results (cash flows) from the project that will enable repayment of the debt.

schema

What are the advantages of project finance for a company?

For the company sponsoring the project, the advantages are multiple:

reduces the risks in in the event the project fails, since any losses are limited to the amount of capital brought into the SPV (contrary to a direct loan taken out by the company);
enables the financing of large projects with minimal investment, since the debt represents a significant part of the financing and the client(s) only contributes the capital;
distributes risk and expertise among different stakeholders since an SPV can be owned by several companies
the debt is generally provided by several banks or institutional investors in order to mutualize/share the risks.

Role of the bank

The bank acts as an advisor. It helps to structure the project by defining the risks of the project and the means to cover them, both at the financial level (definition of the amounts of capital and debt, definition of the levels of senior and mezzanine debt) and at the legal level. The bank finances and recruits additional investors to help finance the project (syndication). It can also act as an agent, i.e., as an intermediary between the client and the project's lenders.

Project finance: for what sectors?

schema

Discover

Our Project Financing Solutions

Our latest news and insights

Energy sovereignty under strain: from transition to strategic control
For decades, the global energy agenda has been framed around transition: decarbonization pathways, renewable deployment...

Expert views

For decades, the global energy agenda has been framed around transition: decarbonization pathways, renewable deployment and climate targets. That paradigm is shifting. The central question is no longer only how fast we can decarbonize, but who controls the resources, technologies and value chains that enable it.

Energy sovereignty under strain: from transition to strategic control

Contributing to decarbonization at scale: connecting the building blocks of an integrated energy transition
As the energy transition accelerates, solutions such as Carbon Capture, Utilization and Storage (CCUS), hydrogen and...

Expert views

As the energy transition accelerates, solutions such as Carbon Capture, Utilization and Storage (CCUS), hydrogen and e-fuels are moving from ambition to deployment across global markets. Technologies are maturing and industrial activity is increasing, but scaling these solutions now depends on something more complex: the ability to structure, finance and...

Contributing to decarbonization at scale: connecting the building blocks of an integrated energy transition

Banking on Nature: Financing Ecosystem Restoration Across the US
As climate pressures intensify, environmental infrastructure and mitigation banking emerge as important enablers to...

Clients' successes

As climate pressures intensify, environmental infrastructure and mitigation banking emerge as important enablers to protect and preserve biodiversity. Societe Generale’s participation in Naturion’s financing highlights how mitigation banking can help channel capital toward nature-based solutions with measurable environmental impact.

Banking on Nature: Financing Ecosystem Restoration Across the US